The Broad Impact of NYC’s New Pied-à-Terre Tax
June 26, 2026Effective July 1, 2026, an owner of "pied-a-terre" co-op or condo unit or 1 - 3 family house located in New York City (referred to as a "Covered Property") is subject to an add-on "pied-a-terre" property tax surcharge (the "PAT Tax") if (a) the Covered Property is not used as "primary residence" and (b) the Covered Property’s "market value" (as set forth on the property tax records) exceeds a dollar threshold (Phase 1 or Phase 2).
When fully implemented, the PAT Tax is intended to apply to a non-exempt Covered Property with a "market value" of $5 million or more. However, because current property tax records pre-date the PAT Tax, the property records are supposed to be updated (under a to-be-determined methodology), so that, in Phase 2, the PAT Tax applies to a Covered Property (regardless of type) starting at a “market value” of $5 million.
The following chart summarizes the application of the PAT Tax over Phase 1 and Phase 2 to a non-exempt Covered Property.
Phase 1 (26/27 and 27/28 Fiscal Years): Phase 1 Market Value and Rates
| Condo/Co-op Unit | 1 - 3 Family House |
|---|---|
| $1M - $3M: 4% ($40K - $120K) | $5M - $15M: .8% ($40K - $120K) |
| $3M - $5M: 5.25% ($157.5K - $262.5K) | $15M - $25M: 1.05% ($157.5K - $262.5K) |
| $5M+: 6.5% ($325K and up) | $25M+: 1.3% ($325K and up) |
Phase 2 (Fiscal Years After Phase 1): Phase 2 Market Value and Rates
| Condo/Co-op Unit and 1-3 Family House |
|---|
| $5M - $15M: .8% ($40K - $120K) |
| $15M - $25M: 1.05% ($157.5K - $262.5K) |
| $25M+: 1.3% ($325K and up) |
Despite its central importance, "primary residence" is not defined under the enabling legislation or current set of proposed rules, even though in the income tax context, questions of residence and domicile are notoriously dependent on "facts and circumstances." Definitional issues aside, a Covered Property qualifies as a "primary residence" if the Covered Property is used as a "primary residence" by (a) an owner of the Covered Property (an "Owner"), (b) a member of an Owner’s immediate family (spouse, child, sibling, parent, grandparent or grandchild), or (c) a lessee under a one-year or more lease. Look-through rules apply to a Covered Property owned through a trust or business entity.
On an annual basis, the New York City Department of Finance (the "DOF") will mail an "initial determination" to an Owner stating that the Covered Property is subject to the PAT Tax for the upcoming fiscal year (July 1), if DOF initially determines that the Covered Property has a market value in excess of the applicable dollar threshold and the Covered Property does not qualify as a "primary residence." DOF is authorized to base this initial determination on “information available,” most likely derived from the absence or presence of a New York resident income tax return associated with the Covered Property’s address. If an Owner fails to contest DOF’s "initial determination" within the 30 days, the Owner loses the right to contest the initial determination for that fiscal year. Given PAT Tax’s rapid roll-out and the strict time limit on appeals, every Owner, even if the Covered Property is used as a primary residence, should be on the look-out for an initial determination (due out by August 30, 2026, for the 2026/2027 fiscal year) from the DOF and ready to contest any error.
For cooperative housing corporations, the PAT Tax can be especially challenging. While an Owner of a condominium unit subject to the PAT Tax will have the tax applied directly to the Owner’s tax invoice, a cooperative housing corporation will initially have to pay the PAT Tax and then pass the PAT Tax through to its tenant-shareholders. Cooperatives will have to potentially address issues regarding the collection of the tax from a tenant-shareholder if it is not paid.
The PAT Tax may also complicate sales, development and lending transactions.
If you need more information about the PAT Tax or have questions about how the PAT Tax applies to your situation, please contact:
Andrew B. Freedland at +1 212 592 1623 or [email protected]
Brett J. Gottlieb at + 1 212 592 1455 or [email protected]
Mark A. Limardo at + 1 212 592-1494 or [email protected]
© 2026 Herrick, Feinstein LLP. HERRICK® is a registered trademark of Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.